Solutions

Trade Credit & Political Risk

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The Global Risk Bulletin is a monthly newsletter produced by Salamanca Group for XL Catlin, profiling recent worldwide developments which have the potential to impact the personnel, assets and business operations of their clients.

In this issue: World News in Brief, Exit Rousseff: The Acrimonious Future of Brazilian Politics, Beyond Banditry: Abu Sayyaf Group in the Philippines, and Handle with Care: Navigating Yemen's Security Environment

This edition looks at certain legislative changes that have developed across the world. On the one hand, there is the tightening up of various regulations to address numerous travel threats, whilst on the other hand, gaping omissions in these policies have weakened legislative authority.

The Global Risk Bulletin is a monthly newsletter produced by Salamanca Group for XL Catlin, profiling recent worldwide developments which have the potential to impact the personnel, assets and business operations of their clients.

The Global Risk Bulletin is a monthly newsletter produced by Salamanca Group for
XL Catlin, profiling recent worldwide developments which have the potential to impact the personnel, assets and business operations of their clients.

Never before has a company’s brand, balance sheet, profitability and reputation been more reliant on the resilience of its supply chain. Though technology has made the world a much smaller place, this interconnectivity poses new risks, especially with the rise of contract manufacturing, just-in-time manufacturing and outsourcing. A company’s ability to manage the risk inherent in its supply chain will define its success in this brave new world.

The Global Kidnap Bulletin is a quarterly newsletter produced by Salamanca Group, profiling recent Kidnap for Ransom and Extortion incidents, related events and global developments worldwide which have the potential to impact personal safety and the safety of a client’s family and/or personnel.

The Gallagher International Credit and Political Risk (CPRI) Market Update: January 2015 offers 2014 CPRI recap highlights while noting that credit-insurer-led forecasts for 2015 appear to indicate an even more significant fall in total insolvencies across the globe. Increases appear to be limited to Russia, China, Brazil and some parts of Europe. However, insolvency levels are still expected to remain considerably above 2007 levels. What should your organization be tracking for 2015 potential trade credit issues?

“Political risk in emerging markets is expected to heighten in 2014 as governments look to balance lower economic growth with the increased expectations of their growing populations” (Lloyd’s of London, January 2014).
Arthur J. Gallagher's Credit and Political Risk Insurance (CPRI) Market Update for January 2014 summarizes the changes in line structure and tenors available from commercial CPRI insurers since the last report in July 2013. The summary reflects the outcome of reinsurance negotiations where renewals have been completed in the intervening period - as well as the arrival of any new insurers. This report also features the economic impact of global market fluctuations as well as the financial implications of political unrest in various areas throughout the world.

President Obama recently issued three Executive Orders (“E. O.”) in response to the annexation of Crimea by Russia. These E.O.s can impose sanctions on named officials of the Russian government, any individual or entity that operates in the Russian arms industry - and any designated individual or entity that acts on behalf of, or that provides material or other support to, any senior Russian government official. We recommend that shipowners (U.S. Persons) consider monitoring the Specially Designated Nationals (SDN) list.

To address some of the most common questions we have received about trade credit, political risk liabilities and more, we’ve created a brief list of Frequently Asked Questions (FAQs).

Do we have to insure all of our accounts to obtain a Trade Credit Risk policy?

No. We help you design a policy that meets your needs. Gallagher Financial Products represents dozens of credit risk insurers that can offer variations of single-buyer coverage, key debtor policies and whole turnover protection. We will present options and recommendations to help you then make an informed decision.

Who handles collections if I purchase a policy?

Your credit department will continue to handle your collections, but with this policy, they will also have access to major insurers as additional resources in making credit decisions.

What does it cost?

Your premium, which is calculated upon completion of an application, is determined by a number of variables including insurable sales, which deductible you select, conditions of payment, the trade sector and the spread of buyers you wish to insure. Rates typically range from $0.10 to $0.85 per $100 of sales.

What perils or causes of loss are covered?

For domestic sales, typically insolvency, non-payment and even pre-shipment are covered. For export sales, all of the above are included - plus political risks such as currency inconvertibility, non-transfer, embargo, confiscation, import/export license cancellation and others, depending on the country of risk.

What information do I need to provide for an application, and are we able to secure non-disclosure agreements?

Insurance underwriters will review your basic financials, accounts receivable aging and bad-debt loss history. They will also review your customer mix and desired credit limits. Non-disclosure agreements are common requests as well.